Due to computer system implementation difficulties, the Department of Finance and Administration failed

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Informations

• Publié par: Sawyog
• Nombre de lectures: 17
• Langue: English

Extrait

STATE OF TENNESSEE
COMPTROLLER OF THE TREASURY
State Capitol
Nashville, Tennessee 37243-9034
[phone]
Justin P. Wilson
Comptroller


August 9, 2010


The Honorable Phil Bredesen, Governor
and
Members of the General Assembly
State Capitol
Nashville, Tennessee 37243
and
The Honorable M.D. Goetz, Jr., Commissioner
Tennessee Department of Finance and Administration
State Capitol
Nashville, Tennessee 37243

Ladies and Gentlemen:

The Tennessee Comprehensive Annual Financial Report (CAFR) for fiscal year 2009 is
complete, and the auditor’s opinion letter was issued August 6, 2010. In comparison to prior years, the
2009 CAFR issuance is not timely by seven months. The reasons for the delay relate to difficulties in
implementation of the State of Tennessee’s Enterprise Resource Planning (ERP) Project, commonly
referred to as Project Edison.

Like most major organizations, the state invests considerable resources in updating information
systems. Unfortunately, these efforts are often marked by cost overruns and other inefficiencies.

The design and implementation of any new computer system present challenges to staff that bring
into play many human elements that cannot be completely predicted or controlled. While we recognize
delays and difficulties with system implementation are common, we believe it is prudent to point out
deficiencies so steps can be taken to improve the state’s systems implementation efforts overall. Review
and analysis of the issues that delayed the completion of the 2009 CAFR provide an opportunity to learn
from those mistakes and to apply those lessons to future information technology procurements.

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August 9, 2010


Context

Our discussion of these issues should be understood in the context of recognizing that the
completion of the 2009 CAFR by August 2010, although seven months late, is a major accomplishment
resulting from the dedication, effort, and time of many state officials and employees. The staff charged
with the design and implementation of the Edison components—the Human Capital Management (HCM)
and the Financial Supply Chain Management (FSCM) components—have worked incredibly hard to
ensure that the state has the best system possible, and staffs at the user agencies have worked tirelessly in
their Edison implementation efforts. The Division of Accounts, in particular, has dealt with extraordinary
challenges.

It should also be noted that although the 2009 CAFR has been completed, the refinement of
Edison must continue.

The financial integrity and the efficient and effective ongoing operations of the State of
Tennessee depend upon the successful operation and maintenance of the Edison system. The state has
committed significant funds and resources over a period of several years to develop a modern, integrated
system to replace 30 outdated systems, some of which were approximately 30 years old. The goals are to
increase operating efficiencies and reduce operating costs. Because of that commitment, it is paramount
that the efforts of Project Edison and agency staffs are structured by industry best practices, activities are
clearly focused, responsibilities are carefully assigned, and progress is effectively monitored.


The Significance of the CAFR

The CAFR for the fiscal year ended June 30, 2009, is the annual audited financial report for the
state, showing the financial position and changes in financial position of the State of Tennessee. The
users of this report, in addition to the citizens and taxpayers, include bond rating agencies, who utilize the
report to determine how to rate Tennessee’s debt offerings; and the General Assembly, to assist in
preparation of the next year’s budget.


Adverse Impact on the Annual Single Audit Report of Federal Financial Assistance Required by
Federal Law

As a result of the late CAFR, the Tennessee Single Audit Report was not completed by the
federally mandated deadline of March 31, 2010, and has not yet been completed. The Single Audit Report
provides information to the federal government on the state’s accountability for federal financial
assistance and is critical in securing continued federal funding. Approximately 40 percent of the state’s
revenues are federal funds. The Tennessee Student Assistance Corporation and some institutions of
higher education have received communications from the federal government as a result of the late report,
listing possible consequences, including delay or termination of future federal funding.

Financial information must be timely to be useful. Lack of timely information has resulted in at
least the following adverse consequences: 1) the General Assembly had to use two years of unaudited
fund balance information to pass the 2011 budget; 2) the federal government has had to make awards and
continue funding without the assurances of proper accountability normally provided by the Single Audit
Report; and 3) federal grantors have not been able to monitor corrective actions on findings that will Page 3
August 9, 2010


appear in the Single Audit. Since the timeline for preparation of the 2009 CAFR and Single Audit has
been extended beyond the 2010 fiscal year, it will likely affect the timing of the 2010 reports.


The First Signs of Implementation Problems

The HCM component was implemented in September 2008. By the beginning of 2009, members
of the General Assembly had received complaints from affected state employees of problems in the
handling of payroll, insurance, and employee taxes under Edison. When questioned by members of the
General Assembly about these problems, officials of the Department of Finance and Administration
(F&A) took the position that the problems were limited and did not represent issues that should slow
down the pace of planned implementation.

In response to a request from the Chair and Vice Chair of the Fiscal Review Committee of the
General Assembly, dated April 15, 2009, we developed and administered two surveys which showed that
employees and human resources directors, respectively, had serious, valid concerns with regard to the
accuracy, functionality, reliability, and efficiency of the HCM component of the system. Employee
respondents reported significant issues, including instances of dropped data; non-payment of salary;
overpayment of longevity; miscalculations of pay, longevity, annual and sick leave balances, overtime,
compensatory time, health insurance premiums, deductions for retirement programs, and taxes; and
disenrollment from insurance programs. There was also widespread dissatisfaction with the pre-
implementation training and the complaint resolution process. The concerns of the state employee
respondents were reinforced by the human resources directors.

After the HCM component had been implemented, the Edison team began implementation of the
FSCM component in January of 2009. Based on our surveys and substantial anecdotal evidence
regarding the breadth and depth of problems with the partially implemented FSCM component, we
recommended on May 20, 2009, that the further implementation of the system in additional agencies
should be postponed and that an independent review be conducted by ERP specialists.

Officials of F&A responded that there was no need to delay implementation. They stated the
problems we had noted were more a matter of dissatisfaction with the changes to the way state employees
had to do their work. The officials downplayed real problems.

The General Assembly determined that the issues noted in the survey did represent substantive
problems with the implementation of the system. As a result, the scheduled implementation timeline was
extended for the larger departments, and F&A contracted with Gartner, Inc. to review the system
implementation process.

Our related prior communications and materials may be found at:
http://tennessee.gov/comptroller/edison.


Gartner Report Substantiates Problems with the Implementation

The July 2009 Gartner report stated that “the issues experienced by Tennessee, while similar in
nature to the experience of other states, were exacerbated by insufficient attention to agency expectations,
incomplete user acceptance testing, limited business process training and unstructured stakeholder
communications throughout implementation.” Page 4
August 9, 2010


In response to this report, the Edison team reevaluated the implementation plans. They conducted
agency readiness meetings and implemented agency readiness checklists for the agencies that had not yet
implemented the FSCM component. The Edison team also held additional meetings with departments
regarding the HCM experience to help address user complaints.

As more Edison team members were assigned to this effort, fewer were available for the day-to-
day tasks and for the activities necessary to assist the Division of Accounts with creation of the CAFR.


Unanticipated Difficulties with Implementation Continued to Slow Down the Preparation of the
CA